Stocks may be off their record highs, but Nobel Prize-winning economist Robert Shiller warns the market is vulnerable to further declines as midterm elections challenge the US president's pro-growth posture.

"It's an election day now and it's about one man: Donald J. Trump," Shiller said at a London conference Tuesday on quantitative investing.

"It's not technically about him but in our minds, they are about him because the narrative has gotten so strong. It's contagious.'

A basket of shares identified by Morgan Stanley as most likely to benefit under Trump's presidency are on track to advance 9 per cent in six consecutive days of gains, the metric's biggest rally since the November 2016 election.

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Wall Street could be rocked by the midterms, fears Nobel prize winner.Credit:AP

While voices on Wall Street are sanguine about elevated cross-asset volatility, Shiller warned that deeper divisions would be a destabilising force for markets.

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"If Trump loses, if his supporters lose, that could launch a period of chaos," Shiller said.

"I do sense that the past volatility just before the election had something to do with a feeling of chaos. Trump said he might shoot at the Mexican caravan and then he took it back. It's just wild. It doesn't feel comfortable."

Pollsters project a Democrat-controlled House and a Republican-led Senate, a scenario that would lead to legislative gridlock.

"It looks plausible so the market goes all the way up with earnings, but these things are temporary but the market doesn't seem to get that."

Shiller, famed for his analysis of asset bubbles, is casting doubt on the sustainability of a bull market which is already flagging, after volatility spiked and global stocks tumbled 7.4 per cent in October, the worst in six years.

Nobel prize winner Robert Shiller.Credit:AP

Even with the recent equity swoon, valuations may not be enough to cushion political risk. The cyclically adjusted price-to-earnings ratio - which Shiller developed three decades ago to smooth out the impact of business cycles - sits at 31 times earnings, far above its historical average. Still, the metric reached as high as 44 just before the dot-com crash.

"We're in a funny mood of fear and chaos at the moment which is a narrative that makes stock markets more vulnerable right now, whichever way the election comes out," he said.